We study decentralized and optimal urbanization in a simple multi-sector model of a rural-urban economy focusing on productivity differences and internal trade frictions. We show that even in the absence of the typical externalities studied in the literature, such as agglomeration, congestion or...

This paper explores how the interaction between firm heterogeneity, urban costs and transport costs determines spatial configuration across regions within a simple general-equilibrium model. We spot light on how firm heterogeneity affects the centrifugal and centripetal forces and reshapes the...

The object of this paper is to study the evolution of trade costs and of the agglomeration of production, as well as their relation. The Home Market Effect prescribes increasing agglomeration when trade costs decrease because it is supposed to strengthen. We study the joint variation of trade...

The present paper focuses on spatial sorting as a mechanism behind the well-established fact that there is a central region productivity premium. Using a model of heterogeneous firms that can move between regions, Baldwin and Okubo (2006) show how more productive firms sort themselves to the...

The monocentric city model is generalized to a fully structural form with leisure in utility, congested commuting, and the equalizing of utility and perimeter land price across metros. Exogenous and agglomerative differences in total factor productivity (TFP) drive differences in metro...

I exhibit a simple and realistic feature of technology and trade costs that influences the partition of manufacturing between the North and South depending on the degree of substitutability of internationally traded inputs in production. In the presence of higher wages in the North, when...

This paper provides a direct test of how fixed export costs and productivity jointly determine firm-level export behavior. Using Chilean data, we construct indices of fixed export costs for each industry-region-year triplet and match them to domestic firms. Our empirical results show that firms...

The impacts of production and transportation technology changes are studied in a general-equilibrium trade model with an analytical solution where agents in each location produce different varieties of a common set of goods. Wages are equalized in nominal terms across locations, with differences...

This paper takes a deep and comprehensive look into the firm-level behavioral reactions to a massive transportation cost shock. Exploiting rich data encompassing the universe of Portuguese private firms and a natural experiment we find that the introduction of tolls on previously toll-free...